Market impact:Citi's upward revision to its 3Q26 Brent forecast reflects near-term price strength, but the bank's unchanged, lower forecasts for 4Q26 and 2027 signal an expectation that oil markets will loosen substantially once the Strait of Hormuz fully reopens. Citi expects a larger than pre-conflict surplus to emerge as flows are normalised, a bearish signal for medium-term crude sentiment. In natural gas, Citi's downgrade to Henry Hub reflects confidence in continued US production growth keeping domestic prices contained, while the increase to TTF forecasts points to tighter European gas market conditions relative to previous expectations. Together, the revisions suggest diverging trajectories for oil and gas markets over the coming quarters, with oil facing downside risk into 2027 and European gas facing modest upside.---Earlier:How to trade oil: Bearish 1st target hit before bulls took control above $90.90---Citi turns more bullish on near-term Brent but stays bearish into 2027 on expectations that a Hormuz reopening will reshape the oil surplus outlook.Summary:Citi raises its 3Q26 Brent crude forecast to $86 per barrel, a mark-to-market adjustment (research note, 3 Sep, 4:02pm).The bank maintains its 4Q26 Brent forecast at $70/bbl and its 2027 forecast at $65/bbl.Citi expects the reopening of the Strait of Hormuz to push oil into an even larger surplus than existed before the conflict.Citi lowers its 3Q26 Henry Hub natural gas forecast to $2.9/MMBtu, citing expected production growth.Citi raises its TTF forecasts to €60/MWh for 3Q26 and €56/MWh for 4Q26.Citi raised its third-quarter 2026 Brent crude oil forecast to $86 per barrel in a research note published on 3 September. The bank described the change as a mark-to-market adjustment, reflecting recent price action rather than a shift in its longer-term view. Citi left its forecasts for the following quarter and beyond unchanged, maintaining a 4Q26 Brent forecast of $70 per barrel and a 2027 forecast of $65 per barrel.The bank's rationale centres on its expectations for the Strait of Hormuz. Citi said that once the strait reopens, oil markets should move into an even larger surplus than existed before the conflict that disrupted flows through the waterway. That is Citi's own forward-looking view, not a confirmed development, and it implies the bank sees current price strength as temporary, with an anticipated supply normalisation eventually outweighing any lingering risk premium and pushing prices lower over the next year and into 2027.Citi also revised its outlook for natural gas markets in the same note. The bank lowered its 3Q26 forecast for US Henry Hub gas to $2.90 per million British thermal units, citing its expectation of continued production growth that should keep domestic supply ample and prices contained. That downgrade stands in contrast to the bank's more bullish stance on European gas, where it raised its TTF price forecasts to €60 per megawatt hour for the third quarter of 2026 and €56 per megawatt hour for the fourth quarter.Taken together, the revisions point to a divergence between Citi's short-term and longer-term price expectations for oil, and between its US and European gas forecasts. For oil traders, the message is that current strength may not be durable if the Strait of Hormuz reopens as Citi expects. For gas markets, the split outlook suggests Citi sees US supply growth outpacing demand while European conditions tighten modestly relative to earlier expectations. Confirmation of Strait of Hormuz reopening timelines and US gas production data would be the key inputs to watch to validate or challenge Citi's revised price path. This article was written by Eamonn Sheridan at investinglive.com.